Philip Ryley: FSA fine over doctored files is harsh lesson

In January the FSA imposed a fine of more than £2m for failings by two insurers to prevent files, that the regulator had requested, from being improperly altered. A sobering lesson can be learnt from the events.

As part of its ongoing supervision of the firms’ complaints handling capabilities, the FSA identified a number of areas where improvements were needed. The firms asked an accountancy firm to complete a sample review, resulting in 28 per cent of the 110 files failing the assessment.

The firms then initiated their own internal review of closed complaint files with a view to ensuring that they were complete and to ensure there had been no customer detriment.

Prior to this, the firms’ customer relations management carried out two conference calls during which they told staff about the 28 per cent failure in the sample review and that this was unacceptable.

During the call, management also said staff should consider what they might do to ensure that files were in a state that would pass FSA inspection and if that required staff to review their closed complaint files, they were encouraged to do so.

If staff took immediate action and changed things now, this would be an extremely positive result. Staff were reminded that the most important thing was to get the right outcome for customers.

The FSA reviewed 50 files. When it received information that some of those files may have been altered or created, it conducted a visit to the firms’ offices.

An internal investigation conducted by the firms revealed that 27 of the 50 files had been altered before they were sent to the FSA, and seven internal documents were found to contain staff signatures forged by a member of staff.

The majority of the alterations were minor in nature and none of the changes resulted in any customer detriment.

The FSA said it is of critical importance that material provided by firms to the FSA must reflect the picture as it is – not as they might like it to be.

Philip Ryley is head of financial services and markets at Michelmores LLP